keeping interest only buy paying off what i can?

level200

Hi guys

Is it possible to remain interest only but pay off what i can when i can off my mortgage? In this financial climate what is best?

beecher2

I'd personally think you'd be best to be on a repayment mortgage, as the temptation would always be to spend the money you hope to overpay on something else. It depends how disciplined you are, but I'd want to cut back on other household expenditure before taking a 'pay it when I can' approach to the outstanding capital.

getmore4less

target your total payments to be at least those needed to pay the mortgage as if it was a repayment.

overpay that total.

what rate are you on it may be better to just save the money

CloudCuckooLand

Depends on your interest rate...
Depends why you are asking now, when you say "remain" - has your Lender contacted you for proof of a repayment vehicle?

https://forums.moneysavingexpert.com/discussion/comment/40452950#Comment_40452950

Moving to repayment is more definite, in eating away at capital. Whether to fix now, depends on the rates of the different products you qualify for.

If there is uncertainty over how often and how much you will pay "what you can" and if you have no other repayment vehicle in place, then getting off IO will help you avoid getting to end of the mortgage and finding you have to find a big chunk of cash...

Kitkatkate_2

hi Level200,

I'd be really interested to know what you do on this one, as we are in a similar dilemma. We are currently on an interest only mortgage of £167,000 - which means repayments of £800 - as this was started 3 years ago when interest rates were higher. We are now coming to the end of our deal and are unsure whether to switch to repayment, or carry on at interest only, but put the difference in a separate account (that we can't touch) and use what we save to pay off a chunk. My maths is not good enough to work out which is best.

1) Switch to interest only for 5 years - get new monthly payments of approx £500 - and put remaining £300 into account for 5 years = £18,000 - and pay that off mortgage in 5 years time.

2) Switch to repayment for 2 years - best rate we can find means new payments of £843 - and then have similar dilemma in 2 years time, when who knows what will have happened to interest rates.

At least if we fix the interest only rate for 5 years - it'll be low - but I agree that we need to be disciplined in ensuring the remainder goes to an account specifically set up for paying off mortgage to ensure we are not tempted to spend it.

Which do you think you will do?

Kate
x

getmore4less

If you remortgage interest only may not be an option unless you have a repayment vehicle allready in place.